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Assume a company is considering buying 1 0 , 0 0 0 units of a component part rather than making them. A supplier has agreed

Assume a company is considering buying 10,000 units of a component part rather than making them. A supplier has agreed to sell the company 10,000 units for a price of $40 per unit. The companys accounting system reports the following costs of making the part:
Per Unit 10,000 Units
per Year
Direct materials $ 18 $ 180,000
Direct labor 12120,000
Variable manufacturing overhead 220,000
Fixed manufacturing overhead, traceable 880,000
Fixed manufacturing overhead, allocated 440,000
Total cost $ 44 $ 440,000
One-half of the traceable fixed manufacturing overhead relates to supervisory salaries and the remainder relates to depreciation of equipment with no salvage value. If the company chooses to buy this component part from a supplier, then the supervisor who oversees its production would be discharged. If the company begins buying the part from a supplier, it can use freed up capacity to produce and sell 2,450 more units of another product that earns a contribution margin per unit of $8.00.
What is the financial advantage (disadvantage) of buying 10,000 units from the supplier?

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